What does opportunity costs mean for you?

If you are looking to get more out of your life, then it is crucial that you understand the power of opportunity cost. If you don’t, you could miss out on major opportunities to grow in your life and give more to your friends, family, and community. However, you must have the right strategies and frameworks for how opportunity cost applies to different areas of life so you can avoid common pitfalls and get to your results faster. Here is what you need to know:

Opportunity Cost 101

Simply put, an opportunity cost is the loss of one choice when another choice is made. By selecting one alternative, you must accept that other avenues are necessarily going to be shut off to you. This kind of sacrifice happens with every choice in life that you make. If you drive North, you can’t drive South at the same time. Here is how opportunity cost relates to various aspects of life:


There are few areas of life where opportunity cost is more severe than business. In today’s digital age with technology like the internet connecting everyone and (almost) everything, competition is at an all-time high. One of the major ways that opportunity costs affect businesses is where they spend their marketing budget to gain more customers. If they advertise 90% on Facebook and 10% on Twitter, for example, they are experiencing an opportunity cost of the potential audience from Twitter. If their competitors are sharply focused on Twitter, they could eat up that market segment fast.

A pharmaceutical company that decides to create a new product that heals cuts faster instead of medicine that helps with coughs is going to incur an opportunity cost. They may get more profits and customers from healing cuts, but what kind of opportunity are they giving up by focusing on that? What if the cough market balloons in the near future? How many additional dollars or customers are they giving up? And what if the cut cure is more time-intensive than the cough medicine? What is the cost of that time that could be spent elsewhere? These are the decisions that businesses must face every day.

Every decision you make in business is binary. You either spend time with this customer or that customer. You either invest a dollar in customer service or in the sales department. The key isn’t to be paralyzed with analysis paralysis, but to understand where your time and money will be most leveraged. Of course, this extends to your personal life as well:


In your personal life, there will be choices that you have to make with regards to opportunity costs. This ranges from where to eat, to who you speak with, and even the people you date or start a relationship with.

For instance, if you choose to talk with someone who wastes your time, you are sacrificing the opportunity to get things done in other areas of your life. As long as you understand what your goal really is then you’ll be able to get your outcomes. But don’t pretend that your time is not valuable.


One of the biggest opportunity cost examples in your personal life is that of investments. You have money to invest, but aren’t sure where to put it. If you place it in one investment, there is a chance for return. However, there is also the opportunity cost of not being able to invest in another opportunity. This could mean more than just the initial upfront money. It could, due to compound interest, cost you 100’s of times of your initial investment in terms of lost gains. So choose your investments wisely and do research before you pull the trigger.


One of the biggest commitments of time and money that people make is going to college. If you go, you’re giving up all that time you could spend building skills another way or earning income. However, if you don’t, you may lose the opportunity of a better paying career or salary in the long run.

Searching for Employment

Being an employee or a self-employed person both have their benefits and drawbacks. No one can make the decision of which is better for you, but when you evaluate opportunity costs you will begin to see what your long term goals are and which option costs you the least in terms of opportunities.


Many examples of opportunity cost involve two choices that have benefits. However, one way to get leverage on opportunity and eliminate a no-win scenario is to never focus on the things you can’t control. These always have negative opportunity cost because you can’t control the outcome. Focus on the your sphere of influence and put all of your resources into these opportunities.

Important vs. Urgent

In life, you will have to balance things that are urgent with those that are truly important. If something is both urgent and important, then obviously it will take up a lot of your time. However, save opportunities that are important but may not have a major deadline. They can end up giving you more benefits than other scenarios in the future if you do justice by them from the start.

When it comes down to it, there is only one resource you can never get back: your time. It is the most valuable thing you have. So don’t make the critical mistake of wasting your time. When you incur an opportunity cost, you really lose valuable time that is compounded into the future and prevents you from doing all the things you want in life. So be smart about your choices. Always weigh the options and ask yourself: is the cost of opportunity worth the investment of my time right now in this moment? If you have discipline, you will find that you can spend more time and energy on fulfilling goals and less time on unimportant minutiae.

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